New energy market reports covering the fourth quarter of 2018

The European Commission’s latest reports on gas and electricity markets, which cover the fourth quarter of 2018, have just been published, containing a wide range of data about supply and usage of electricity and gas in the EU.

The electricity market report shows that in October 2018, the joined wholesale price zone of Austria and Germany was separated, in order to facilitate the operation of the TSOs.  In France, nuclear electricity generation increased since more plants were cleared from the inspections of the entire French nuclear power fleet. The Belgian market was expected to face serious supply concerns due to ongoing maintenance in Belgium’s nuclear power stations. While power shortages did not materialize, the Belgian wholesale price increased in Q4 2018 by 24% compared to Q4 in 2017. The long tendency of gradual decoupling of the evolution of electricity consumption and GDP was confirmed in the fourth quarter of 2018. While EU GDP growth continued to decelerate, electricity consumption rose, driven mainly by industrial demand as heating needs were subdued due to warmer than usual meteorological conditions. The steady increase of the prices of emission allowances was maintained in Q4 2018. In the last weeks of 2018, the price rose above 25 €/t for the first time, denting the competitiveness of hydrocarbon power generation sources. The leading wholesale indicator was trading in the range of 60 €/MWh in Q4 2018, continuing on a rising trend that started in 2016, but also showing signs that it can be sustained at that level or even reversed. There were fewer occurrences of negative prices in October-December 2018 than in Q4 2017, implying an improving market operation in a context of a steady increase of renewable generation sources. Industrial prices for electricity remained on a diverging path across the EU for all monitored consumer bands. Industrial prices in the EU were lower than in Japan, on par with China and Korea, but more expensive than in the US by about 40 €/MWh. The energy component of prices paid by households increased in all but four Member States from September 2017 to September 2018, including Germany and Spain, two countries with a relatively high share of variable renewable energy. Network charges and taxes remained stable across the EU on a year-on-year comparison.

Latest reports on gas and electricity markets

The gas market report shows that gas imports decreased by 3% in the fourth quarter of  2018, relative to the same period in 2017, while EU gas consumption for the whole year was 474 billion cubic metres (bcm) or 1.8% lower than the previous year. Indigenous gas production in 2018 fell to 120 bcm, equivalent to an 8% drop. The UK became the largest gas producer country in the EU and the Netherlands (previously the largest) became a net gas importer for the first time since the gas extraction started in the country. In 2018 the EU imported 363 billion cubic meter natural gas, resulting in an import bill of € 90 billion, up from € 75 billion in 2017. Russia remained the biggest pipeline gas supplier to the EU in 2018, ensuring around 40% of imports. However, in the fourth quarter of 2018, owing to shrinking market price premium in Asia, LNG imports showed a significant increase - up 59% compared to Q4 2017. Both the US and Russia managed to increase its share in total EU LNG imports. European companies (e.g.: PGNiG in Poland) concluded several long-term LNG import contracts with US firms in 2018, aiming at diversifying import sources and enhancing security of gas import supply. After reaching a five year highs in September, wholesale gas prices in Europe decreased measurably in the fourth quarter of 2018. Falling oil and decreasing coal prices, abundant LNG supply in Europe and mild weather conditions putting a lid on heating needs all contributed to the decrease in wholesale gas prices. Spot gas prices during Q4 2018 were, however, higher than forward contracts. Retail prices for industrial customers increased by 13% in Q4 2018 on EU average, compared to the same quarter of 2017, reflecting the impact of higher wholesale prices in the previous quarters filtering in retail contracts.

In December 2018, the European Commission adopted a communication aimed at strengthening the international role of the euro, including the energy field. It noted that increasing liquidity on the euro-traded gas hubs in the EU contributes to strengthening the role of the euro in the energy sector.